www.electronicpaymentsinternational.com Issue 367 / January 2018

GETTING UP TO SPEED

THE US FINALLY STARTS THE CLOCK ON FASTER PAYMENTS ANALYSIS INSIGHT FEATURE

Replacing the irreplaceable: The industry reflects on Hyperwallet sees the bugbear of upgrading 2017, and predicts the new opportunities in the fast- legacy systems year’s talking points growing gig economy

EPI January 2018 367.indd 1 30/11/2017 12:36:23 contents this month

NEWS 05 / EDITOR’S LETTER 06 / DIGEST • Europe’s instant payments infrastructure goes live • UniCredit goes live with instant payments in Italy and Germany • ACI Worldwide signs Payworks licensing agreement • PayPal enables invoicing within Facebook Messenger • Starling Bank partners with Yoyo • Cash still king in Europe: ECB report • Samsung Pay launches in Mexico • WorldRemit rolls out digital COVER STORY remittances to South Korea • Glint introduces gold payment app • Payment giants open Spanish US FASTER innovation hub PAYMENTS 09

Editor: Douglas Blakey Group Editorial Director: +44 (0)20 7406 6523 Ana Gyorkos [email protected] +44 (0)20 7406 6707 Director of Events: Ray Giddings [email protected] +44 (0)20 3096 2585 Senior Reporter: [email protected] Patrick Brusnahan Sub-editor: Nick Midgley +44 (0)20 7406 6526 +44 (0)161 359 5829 Head of Subscriptions: [email protected] [email protected] Alex Aubrey +44 (0)20 3096 2603 Junior Reporter: Briony Richter Publishing Assistant: [email protected] +44 (0)20 7406 6701 Joe Pickard +44 (0)20 7406 6592 [email protected] [email protected]

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2 | January 2018 | Electronic Payments International

EPI January 2018 367.indd 2 30/11/2017 15:52:15 contents january 2018

12 s to talk about cracking China, disrupting FEATURES SWIFT,INDUSTRY and leveraging INSIGHT WeCha STRATEGY 09 / FASTER PAYMENTS 12 / YEAR-END REVIEW 16 / CROSS-BORDER The US began its migration to Faster Leading lights from the payments sector PAYMENTS Payments later than other countries such as and financial services industry reflect on the Following a successful partnership, nexo the UK and Australia, and hopes to complete primary developments during 2017, and look standards chair Claude Brun tells Briony the process by 2020. A key advantage is that ahead to the new year to discuss with EPI Richter how the business has enabled US payments networks can learn from these where the industry is heading and what to Carrefour Group to transform its European countries’ experiences. Robin Arnfieldreports look forward to payment infrastructure 18 / HYPERWALLET 22 / MCLEAN ROCHE 20 / DESJARDINS Hyperwallet sees opportunities in low- Canada’s Desjardins Group has implemented value remittances for the fast-growing gig CONSULTING an open standards payments architecture economy. Robin Arnfieldspeaks to Tomas 2018 will mark 10 years since ‘fintech’ entered from nexo, and is now looking to offer the Likar, vice-president of strategy and business the lexicon, threatening to totally upend the architecture to other financial institutions development at the San Franciscan mass- banking sector as we know it, writes McLean via its Monetico acquiring joint venture with payout specialist Roche Consulting’s Grant Halverson Crédit Mutuel. Robin Arnfield reports ANALYSIS 17 / LEGACY SYSTEMS A bugbear of large, historical financial institutions is that monolithic platforms struggle to keep up with the fast-paced demands of the financial sector. However, how does one go about replacing them? 18 Patrick Brusnahan investigates 17

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EPI January 2018 367.indd 3 30/11/2017 12:39:26 Simple, secure and effortless digital solutions for fi nancial services organisations

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IE Adverts - 2017 MG Edit.indd 1 27/07/2017 12:46:16 editor’s letter

One to watch: Huy Nguyen Trieu eyes up digital launch

Douglas Blakey, Editor

his is unlikely to be just another digital banking There is always the danger of overblown hype and startup. As EPI goes to press the news that exaggerated claims at launch time, but in this case the launch T fintech entrepreneur and ex-Citi banker Huy of Paytm’s payments bank seems to justify the enthusiasm of Nguyen Trieu is leading a team to roll out a new digital Indian Finance Minister Arun Jaitley. He said: “This is a new bank is eye-catching. chapter in history being written, and with every day some such Just when many of us argued that we were reaching initiative is taking place, which helps make the economy more saturation point for new UK digital banking launches, formal.” Disruptive Finance CEO Huy Nguyen Trieu and his team, including ex-Atom Bank CTO Paul Hanks, are stepping up BITCOIN GOES THROUGH THE ROOF plans to raise capital and obtain regulatory approval in 2018 or Sanity, at some point, may yet prevail as regards the price of 2019. Bitcoin. Surely gamblers, correction ‘investors’, will take their According to a report in The Telegraph, the as-yet-unnamed profit en masse and get out while the getting is good? Is this bank plans to launch a mobile savings app that uses artificial not just another old-fashioned bubble? So goes the argument intelligence to give customers personalised advice. that many, including this writer, have been making about Ordinarily, I would suggest that yet another digital banking Bitcoin. startup is going to find the going tough; but I am loath to bet In 2017 Bitcoin’s market cap has soared from $15bn to against Huy Nguyen Trieu. $160bn. It is truly sobering to read quotes attributed to Raising sufficient capital is unlikely to be the new bank’s Alistair Milne of the Altana Digital Currency Fund stating biggest challenge. It certainly has not been much of a challenge that Coinbase, the leading US platform for buying and selling for Paytm, and the launch at the end of November of Paytm Bitcoin, has grown its customer numbers to 13.3 million. Payments Bank confirmed the extent of its ambitions. In the I did not buy into Bitcoin at $500, $1,000 or any other price. last two years and in the period to 2020, its investment will The best of British to friends and workmates now jumping on be in the region of INR200bn ($3.1bn). It aims to become the the bandwagon. world’s largest digital bank with 500 million accounts. As the year draws to a close, it only remains to thank all In terms of growing customer numbers quickly, Paytm has subscribers, contributors, events sponsors, press officers and form: its digital wallet has already signed up more than 100 PRs for their help and support in 2017, and to wish all a merry million customers. The payments bank will operate separately Christmas and a prosperous New Year. from the digital wallet; customers of the former will be able to To say that we live and work in fascinating times is the obtain a debit card and will receive interest on their balance. biggest possible understatement. <

Get in touch with the editor at: [email protected]

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EPI January 2018 367.indd 5 30/11/2017 12:39:42 News | Digest

news digest Europe’s instant payments ACI Worldwide signs Payworks licensing infrastructure goes live agreement The European Payments Council (EPC) has The geographical scope of SCT Inst ACI Worldwide has signed a licensing announced that its Single Euro Payments will gradually increase to more than 34 agreement with POS payment Area Instant Credit Transfer (SCT Inst) European countries, the EPC said. infrastructure provider Payworks to scheme has gone live. European Payments Council chair Javier increase its cloud-based omni-channel Nearly 585 payment service providers Santamaría said: “With its numerous payment capabilities. (PSPs) from Austria, Estonia, Germany, advantages, the SCT Inst scheme fully ACI Worldwide will integrate Payworks Italy, Latvia, Lithuania, the Netherlands and anchors European payments in the technology into the front end of its UP Spain have come together to support the anywhere, anytime digital world. Merchant Payments platform. launch of the SCT Inst scheme. “SCT Inst is the only regional initiative ACI Worldwide said the integration will Customers of these PSPs – individuals, of this kind in the world. The European deliver a device-agnostic POS solution businesses, corporations and payment community can be proud of the in the cloud, which is pre-certified with administrations – will now be able to work achieved to make instant euro credit multiple card readers, processors and transfer up to €15,000 ($17,835) in less transfers a reality today. acquirers. than 10 seconds round the clock, including “I can only encourage PSPs who have ACI Worldwide senior vice-president weekends and holidays, across borders. not joined SCT Inst yet to do it as soon Mike Braatz commented: “Payworks’ PSPs from Belgium, Finland, Germany, as possible. This enhanced European integration into our RESTful open API Malta, the Netherlands, Portugal and payments integration will have tremendous means that clients immediately benefit Sweden are expected to join the scheme in benefits for European consumers and from our extensive global payments 2018 and 2019. businesses alike.” < network of more than 350 payment methods and acquirers. “We have brought together our UniCredit goes live with instant extensive global connectivity with a turnkey solution that is fully white-label, payments in Italy and Germany so that payment providers and merchants Germany, and also the first to use the format have the choice to brand their payments for a cross-border payment. Currently, the infrastructure as their own,” Braatz European Payments Council (EPC) has set a continued. limit of €15,000 ($17,835) per transaction. “This gives retailers the freedom to Gianfranco Bisagni, global co-head of develop and deliver the sort of seamless CIB at UniCredit, said: “After a very focused shopper experiences that are proving to be development and implementation process, a key competitive differentiator.” the official launch today is a proud moment Payworks CEO and co-founder Christian for us. Deger said: “What is most exciting about “We have always aimed to lead the way on our expanded relationship are the market developing instant payments solution for our demands and use cases that ACI can clients, and we are excited about the benefits address with the new solution; from single this new service will bring to our clients – terminal market stalls and pop-up stores, promoting speed and transparency through through to assisted shopping, ‘queue 24-hour, 365-days-a-year coverage and real- busting’ and even high-volume retail. time notifications of successful payments.” “For many years, we’ve seen brick-and- UniCredit said that after one week of live mortar retailers moving online, but on Italian bank UniCredit has launched a cross- operation in the European instant payments separate platforms,” Deger added. border instant payments solution in Italy and infrastructure, outbound payment execution “With the solution offered by ACI, Germany, immediately after the European will be available in Germany starting from 27 merchants have access to a true instant payments infrastructure went live. November 2017, while outbound payment omni-channel payment gateway that With the launch, UniCredit has become execution in Italy will be available from 22 consolidates both digital and physical the first bank to offer real-time payments in February 2018. < transactions.” <

6 | January 2018 | Electronic Payments International

EPI January 2018 367.indd 6 30/11/2017 12:39:52 News | digest

PayPal enables invoicing Cash still king in within Facebook Messenger Europe: ECB report an invoice with details such as item name, description, price and quantity, before sending it to the intended recipient. The invoice can also carry an image of the product, so the purchaser can immediately identify the invoice and make a payment. PayPal’s director of product, next- generation commerce, Shilpa Dhar, said: “We already enable many of these experiences, like person-to-person commerce within Despite rapid progress made by mobile Messenger. and card payments, cash still dominates “This use of Messenger is just the latest consumer payments in the European PayPal has expanded its partnership with example of how we are exploring and enabling Union, according to a new report by the Facebook by launching a new feature that commerce in new contexts – building on the European Central Bank (ECB). allows its customers to send invoices through existing work we’ve done to help consumers Such is the dominance of cash at the Facebook Messenger. and businesses use the PayPal platform to send POS in Europe that around 79% of POS The new chat extension will make it easier and receive payments through other Facebook transactions were made in cash in 2016, for sellers and buyers to buy and sell goods experiences.” amounting to 54% of the total value of and services through Facebook, enabling “We will continue partnering across payments. sellers to create and send an invoice directly the ecosystem to help simplify payment In Germany, the bloc’s biggest economy, within a Messenger conversation. experiences and create seamless connections Austria and Slovenia, 80% of all in-store Users will have to open an extension tray between consumers and merchants wherever transactions were carried out in cash. where they can choose PayPal, and create commerce might be occurring,” she added. < Cards were the second most frequently used payment instrument at POS, accounting for 19% of the transaction Starling Bank partners with startup Yoyo volume. However, cards made up 39% of the overall value of payments. automatically receive retailer loyalty points The study highlights that cash was least when paying at certain high street stores. used in the Netherlands, Estonia and Yoyo uses Starling’s open API platform Finland, where its share of the transaction to allow customers to scan cards and start volume ranged between 45% and 54%. collecting loyalty points when they pay Men, and consumers aged between with Starling. 40 and 64 tend to prefer cash payments. Starling CEO Anne Boden said: Younger consumers, aged between 18 and “Together, Starling and Yoyo can 39, carried out fewer cash payments. demonstrate to the industry the The report said: “Although the share of importance of Open Banking that puts contactless payments in many countries customers first. is still low, the survey results suggest that “We are excited to be leading the the speed with which such payments have changes in the industry ahead of the been embraced in some countries may incoming regulations in the UK and Europe mean that once payment cards and POS in 2018. terminals are enabled with contactless “The past four months have seen us technology on a wider scale, the share launch our Marketplace and partner with of contactless payments could increase such an array of innovators in fintech.” significantly. “Our partnership with Yoyo only serves “Since contactless payments are to reinforce our core vision to empower typically relatively low value, and 81% of consumers, reward our customers, and all payments at POS are below €25 ($30), Anne Boden, Starling Bank reduce the day-to-day burdens of personal this could have a significant impact on the Starling Bank has launched its latest API finance,” Boden added. use of cash for smaller-value payments, partnership, with Yoyo Wallet, a UK-based Starling Bank has developed similar especially given that respondents who mobile payment and loyalty platform. partnership agreements with money prefer cash and those who prefer cards The partnership will enable cardholders management app Yolt, digital receipt both appear to place importance on the to link a Starling bank account to a Yoyo startup Flux, FitBit Pay, Transferwise, transaction speed of their preferred means Wallet. By doing this, the cardholders can Moneybox, Houndify and Tail. < of payment.” <

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EPI January 2018 367.indd 7 30/11/2017 12:39:59 News | Digest

Samsung Pay launches in Mexico South Korean technology giant Samsung communication (NFC) and magnetic secure It does not store card details on devices, has introduced mobile payments service transmission (MST) technologies. MST but uses a digital token. Samsung Pay in Mexico – its third market in technology enables merchants that do not In Mexico, Samsung Pay is currently Latin America after launching in Brazil and have NFC terminals to accept Samsung Pay supported by American Express, Banorte, Puerto Rico. using traditional credit card machines. BanRegio, and HSBC Bank. It is already The payment service will allow users Users need to swipe an eligible Samsung available in over 20 countries, including to make payments at almost all locations Galaxy smartphone, select a card, South Korea, the US, China, Australia, where contactless payments are accepted. authenticate using a fingerprint or PIN, and Singapore, Russia, Canada, India, Sweden, Samsung Pay supports both near-field tap the smartphone near the POS terminal. Switzerland, the UK and Vietnam. < WorldRemit rolls out digital Glint introduces gold payment app remittances to South Korea UK fintech Glint has introduced a new mobile app that allows customers to pay for goods and services in gold. The Glint iOS app will allow users “ to make payments in several different currencies, including gold. The fintech has partnered with Mastercard and Lloyds Bank to allow users to load credit onto their account and purchase physical gold bullion stored in a Swiss vault. The pricing is based upon interbank exchange rates, and the company has UK-based WorldRemit has expanded its excess of $6.6bn in remittance payments said that there are no hidden charges for global reach by launching its digital money in 2015. users. Glint said it hopes to give its users transfer services to South Korea. WorldRemit’s regional business the chance to protect their wealth during The service will allow users to send development director for Asia-Pacific, uncertain economic times. remittances to more than 120 new cash Bryce Currie, said: “With the launch of this Glint chief executive Jason Cozens said: pickup locations across the country new remittance service we will be helping “Everyone is familiar with gold as one using phones or the company’s website. the South Korean diaspora access a wider of society’s oldest means of exchange, Around 6% of South Koreans work and live choice of money-transfer options and a its universal acceptance, its reliability, overseas, with top migration destinations faster, more convenient and secure way of its history as a store of wealth and as a including the US, Japan and China. sending money home to their loved ones.” means of underpinning the value of paper Remittances play an important role in WorldRemit has offices in the US, Japan, currencies. the South Korean economy. According to Canada, South Africa, Singapore, the “Unlike paper currencies, gold cannot be the World Bank, South Korea received in Philippines, Australia and New Zealand. < wiped out, devalued or corrupted.” < Payment giants open Spanish innovation hub CaixaBank, Global Payments, Samsung, Visa digital and tech businesses and startups. An Ongoing areas of investigation range from and Arval have inaugurated the Payment initial total investment of €5m ($5.9m) has biometrics to the Internet of Things, including Innovation Hub, Spain’s first innovation been earmarked for the project over the next the harnessing of new technologies such as hub specialising in merchant commerce three years. blockchain and machine learning. and payment methods and one of the first The centre will be staffed by a dedicated Projects at the Payment Innovation Hub anywhere to be backed by cross-industry multidisciplinary team, although each project will largely focus on customer experience and leading businesses. will include its own group of researchers, security, as well as exploring new models and The aim of the project is to establish a which may also include members of the business opportunities related to the world of world-leading innovation hub in payment Payment Innovation Hub, experts from payment methods. methods. partner companies, independent specialists, In the first few months the centre has The Payment Innovation Hub is located at startup businesses, or other groups and plans to pursue four core projects: creating Barcelona’s Pier01, a space set up by Barcelona institutions interested in specific areas of cashless spaces, invisible payments, fintech and Tech City to accommodate more than 100 research. connected cars. <

8 | January 2018 | Electronic Payments International

EPI January 2018 367.indd 8 30/11/2017 12:40:12 feature | US faster payments

us targets 2020 for faster payments implementation

The US began its migration to Faster Payments later than other countries such as the UK and Australia, and hopes to complete the process by 2020. A key advantage is that US payments networks can learn from these countries’ experiences. Robin Arnfield reports

“ ur Faster Payments dialogue The latest is Australia, whose New consultancy to review the proposals against the started in 2013, 10 years after Payments Platform’s central Faster Payments criteria the Task Force established. When the Othe Check 21 cheque truncation infrastructure is due to go live by the end of Task Force finished its work in July 2017, we initiative,” says Sean Rodriguez, executive 2017. According to a New Payments Platform decided on 10 key recommendations to keep vice-president at the Federal Reserve Bank spokesperson, participants will launch services the momentum going, along with a roadmap of Chicago. for their customers in early 2018. and timeline for moving forward.” “The Fed began discussions with the “We realised we needed to increase the payments industry to determine how to make speed of our payments system to keep up PRIVATE SECTOR improvements in the US. We then released with what was happening in the rest of the a consultation paper in 2013, followed by a world,” Rodriguez says. “In the US, we “Our idea was not to impede any private- 2015 report called Strategies for Improving the have a complex banking system, so moving sector marketplace developments,” says US Payments System (SIPS).” toward a Faster Payments environment takes Rodriguez. “It was important that the process The SIPS report included five desired considerable effort and co-ordination.” should complement marketplace activity, not outcomes: The Fed’s Faster Payments Task Force inhibit it.” • Improve the US payment system’s speed; published the first part of its final report in The Fed’s 10 recommendations were • Improve payment security; January 2017 and the second part in July laid out as logical next steps forming a call • Improve efficiency; 2017. to action to realise the Task Force’s vision • Improve cross-border capabilities to and “The Task Force, comprising over 300 of Faster Payments in the US by 2020, from other countries, and people from different stakeholder segments, Rodriguez says. • Achieve all the above with industry created a set of Faster Payments criteria “One of the main drivers of our effort collaboration. that describe the kind of system we want to to improve the US payments system is the achieve,” says Rodriguez. growth in consumer acceptance and use of NO MANDATE “We invited solution providers to give their digital payments,” he explains. views by submitting proposals, and hired a “Fortunately, we aren’t trying to fix a system “The Fed can’t mandate the introduction of that is broken, but we are trying to add more Faster Payments, as many other countries features and cater to future business and were able to do for their Faster Payments consumer demand for a real-time exchange of migration,” says Rodriguez. value. Our vision statement targets 2020, and “We knew we had to do this via we think payments improvements can, and collaboration between interested stakeholders We knew we had will be, made to happen by then. rather than through a legislative mandate from “The Fed isn’t planning to be in the market Congress. To get started, we set up a Faster to do this via with Faster Payment solutions of our own, but Payments Task Force and a secure payments we’ve launched a work effort to look at what taskforce in mid-2015.” collaboration we can do to help the market achieve faster There were 15-20 Faster Payments solutions payments, for example directory services or in place around the world in 2015, and between interested network access,” Rodriguez continues. today there around 50 countries with Faster “Quite frankly, it has yet to be determined Payments systems in place or in development, stakeholders what our specific role will be in a Faster Rodriguez notes. Payments ecosystem.”

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EPI January 2018 367.indd 9 30/11/2017 12:40:30 feature | US faster payments

INTEROPERABILITY Unlike the UK, which moved to Faster Payments a decade ago, the US will “A difficult, but nonetheless achievable goal implement the ISO 20022 messaging is to bring about ubiquity in faster payments, standard in its Faster Payments networks, as the Task Force recommended,” Rodriguez EPI understands. The UK is now looking to notes. update its networks to ISO 20022. Ubiquity means consumers and businesses will be able to make real-time payments EFTA and transfers from accounts at any US financial institution (FI) to accounts at any “The Fed has got a lot of industry support other FI, just as they can today through the and, by acting as a catalyst, really got the Federal Reserve Bank’s US wire transfer and ball rolling on the Faster Payments project,” automated clearing house (ACH) networks. says Kurt Helwig, President and CEO of US Rodriguez says The Clearing House (TCH) payments industry group the Electronic Funds – which operates a private-sector alternative Transfer Association (EFTA). ACH and wire transfer network to the Fed’s “Now the majority of the Fed’s Faster systems – as well as the card networks and Payments work is done, they are focusing P2P platforms such as Zelle are all working on some governance issues and trying to hard to connect everyone to Faster Payments understand what the Fed’s role in Faster in the US. Payments should be, going forward.” Sean Rodriguez, Federal “There is dialogue between operators and Other countries, especially those with fewer Reserve Bank of Chicago different service providers to figure out how financial institutions than the US, have had to ensure that everyone can be connected, an easier task in their payments improvement Oakes, Venmo’s exchanged value increased regardless of the size of their financial journey. from $906m in the fourth quarter of 2014 to institution,” he says. “Trying to compare the US Faster Payments $3.2bn in the first quarter of 2016. “You would expect that the same ubiquity initiative with other countries’ Faster A blog by Glenbrook Partners consultant and interconnectedness that prevails in ACH Payments experience isn’t an apple-to-apple Elizabeth McQuerry notes that, responding to transfers and wire transfers would also apply comparison,” says Helwig. the faster payment capabilities of PayPal and to Faster Payments transactions.” “You can mandate a top-down Faster Venmo, US financial institutions now have Payments move in countries with a small five faster payment rails: MOMENTUM number of banks, but that wouldn’t work in • Push to cards: both major networks have the US. developed a credit push payment option “We were concerned that, once the Task Force The marketplace has been evolving in for their issuers via Mastercard Send and issued its final report and ended its business in the US to Faster Payments, and some US Visa Direct. Notably, both have cross- July 2017, that the momentum toward Faster companies already have Faster Payment border capabilities; Payments might slow down,” says Rodriguez. solutions such as Zelle and TCH’s real-time • Running batch processes more frequently: The National Automated Clearing House Association (NACHA) network is now offering Same Day ACH credits and A difficult, but nonetheless achievable debits. NACHA oversees the US national ACH infrastructure; goal is to bring about ubiquity in faster • Bank-owned consortia have brought two new Faster Payments services to the US; payments, as the Task Force recommended • Zelle, initially targeting the peer-to-peer use case, and • Real-time payments from TCH, which is “That hasn’t been the case, and we’re payments (RTP) system. Faster payments also likely to be extended cross-border in working now with the payments industry on a won’t happen overnight in the US, but the the future. Faster Payments governance framework and a marketplace is responding to the demand for directory workgroup. Faster Payments.” “This is a remarkable amount of innovation, “The Fed and the industry are looking at even in today’s fast-paced payments industry. recommendations that have been laid out for OTHER INITIATIVES All of these services aspire to be the dominant moving forward and so the momentum now provider in their space,” McQuerry wrote. is as fresh as it has ever been. We can learn While still a small player in terms of overall “But these new instant payment services in the from other countries and markets that have US payments volumes, PayPal-owned P2P US exhibit limited interoperability.” gone before us such as the UK and Australia. payments platform Venmo has seen rapid “The ACH system operated by NACHA has There are clear advantages in not being the growth. moved from next-day to same-day, but that first mover in making payments system According to a blog by McKinsey & isn’t real-time,” says Cary Whaley, first vice- improvement.” Company consultants Rob Hayden and Liz president, payments and technology policy

10 | January 2018 | Electronic Payments International

EPI January 2018 367.indd 10 30/11/2017 12:40:35 feature | US faster payments

at the Independent Community Bankers of US real-time payments infrastructure America, a trade association for small banks. “The funds sent shows up on the recipient’s statement next day.” ZELLE

A near-real-time P2P digital payments network operated by bank-owned consortium Early Warning, Zelle was previously called ClearXchange. In October 2017, Zelle announced a surge in third-quarter payments, resulting in over 60 million P2P payments valued at $17.5bn. Bank of America says its customers made over five million Zelle transactions, totalling $1.5bn dollars in October 2017, up 90% from P2P transactions for the same period last year. One of Early Warning’s owners, Bank of America now has over 2.5 million active monthly Zelle P2P users. Zelle’s mobile app enables users to make mobile payments from their bank accounts and Visa or Mastercard debit cards, even if Source: The Clearing House their financial institution is not part of the consortium of 30 banks that backs Zelle. for every US bank, credit union and “This wouldn’t be providing a regulatory The app, which competes against services community bank.” mandate, but facilitating universal access and such as Venmo and Square Cash, also allows Whaley notes that TCH is working with ensuring that financial institutions – since users to split payments. three major service providers in the US they have to connect to the Fed – would have In November 2017, Zelle said it had banking and payments space. to accept all payments that come via the Fed.” selected ACI Worldwide as a technology “It hopes these three providers will enable The letter said the ICBA, CUNA and partner, providing integration for financial it to reach the majority of the US banking NAFCU support the Fed providing central institutions to connect to the Zelle Network. industry,” he says. “But this remains to be bank settlement capabilities to support all seen. Faster Payment service provider functionality. THE CLEARING HOUSE “As a comparison with TCH, a small bank “Beyond settlement capabilities, our can develop a P2P app that lets its customers organisations see three possible operational TCH, which is owned by 30 banks, launched send money to any banked person in the US roles for the Fed,” it said. its RTP system in November 2017. In a because that small bank uses the national “First, the Fed could serve as an on-ramp to statement, TCH said this is the first new core ACH Network. real-time payments, leveraging its connectivity payment system to be developed in the US in “The reason there is ubiquity in the ACH among financial institutions to provide all over 40 years. Network is because the Fed is involved in it with access to real-time payments. BNY Mellon, US Bank, Citi, JP Morgan, and connects the big banks plus the smaller “Second, the Fed could serve as an operator PNC and SunTrust are the first banks to community banks and credit unions to it. for real-time payments, a role the Fed adopt RTP, which was built using technology TCH will need to build that ubiquity, and this currently serves for cheques, ACH payments, from Mastercard-owned Vocalink. isn’t going to come immediately.” and wire transfers. The RTP platform will support e-invoicing, “Lastly, the Fed could operate a payments bill payments, insurance claim payments and ECOSYSTEM directory which could link to financial cash-on-delivery payments. RTP also provides institutions, as well as to other private-sector immediate confirmation alerts that payments Whaley says the ICBA is very concerned payments directories.” have been sent and received. that the Fed has not committed to the The letter continued: “While there are “RTP will be fully available in the first role of ensuring ecosystem ubiquity and many real-time payment applications in quarter of 2018,” says Whaley. “Instead of interconnection between US banks and credit operation or under development, the work of batch processing, the RTP will receive single unions for real-time payments. the Faster Payments Task Force suggests none entries in real time. “The ICBA, the Credit Union National are likely to reach all financial institutions. “TCH’s strength is that it will be doing Association, and the National Association “We don’t believe any of the potential 80% of the transactions of the present US of Federally-insured Credit Unions wrote to private-sector Faster Payments service electronic payments volume, but that only the Fed in April 2017, asking it to play an providers will be committed to the same level involves a handful of big US banks. For Faster operational role in real-time payments,” he of safety, transparency, equitable access, and Payments to work, they must be ubiquitous explains. ubiquity as the Fed.” <

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EPI January 2018 367.indd 11 30/11/2017 12:40:36 industry insight | year-end review

industry insight: end-of-year review and 2018 forecasts

Experts from the payments sector and financial services industry reflect on the primary developments during 2017, and look ahead to the new year to discuss with EPI where the industry is heading

Mobile payments: a catalyst for change Simon Pepper, head of product, Tola Mobile On the whole, the payments industry has not encountered More consumers across Europe are now realising the much change over the course of 2017. Payment services benefits of paying directly via their mobile. Merchants are operating within Europe have been adapting their services therefore increasingly looking to mobile payment providers in preparation for the introduction of the revised second to help them replace existing cumbersome payment Payments Directive (PSD2) in January. processes with the simplicity of using a mobile phone However, this update in legislation has been well anticipated number, to allow consumers to verify and make instant by the industry, and while many of these changes have been purchases for goods and services more securely. rolled out slowly this year, they are unlikely to fully disrupt the sector until the directive takes effect. BILLING IDENTIFIER By using a mobile phone number as the ‘billing identifier’ for MASS MARKET ADOPTION a transaction, consumers are able to eliminate the process of The fundamental requirements for enabling mass entering lengthy credit card details, which ultimately market adoption of mobile payments have also improves the entire payment journey. remained the same, with strong customer Not only is the convenience of this process authentication, authorisation and payment fundamental to the increase in uptake of transparency remaining at the forefront of mobile money worldwide, it also presents a all developments in technology and services clear opportunity for new players wanting to across the sector. disrupt in the current market. The upcoming changes in light of PSD2 The nature of mobile payments will also will, however, see payments providers place allow merchants and service providers to further value on these factors, as concerns over maximise sales, by tapping into the downturn consumer security increase and the adoption rate in consumer purchase rates which typically occurs of mobile money accounts among consumers increases towards the end of each month. globally. Charging purchases against a mobile money account enables In 2018, we hope to see mobile payments become as widely consumers to fill the gap in the lack of available funds adopted in the UK and Europe as mobile wallet transactions during the last two weeks before payday, giving them the across sub-Saharan Africa. Throughout this region, payments opportunity to complete more successful purchases. As a via mobile money accounts are rapidly overtaking physical result, we may well see mobile payments act as a catalyst cash as the dominant method, and are diminishing the mass for change in consumer shopping habits over the next year, adoption of bank and credit cards for daily use. whilst helping more merchants to continue driving sales. <

12 | January 2018 | Electronic Payments International

EPI January 2018 367.indd 12 30/11/2017 12:41:00 industry insight | year-end review

Blockchain for Digital Identity: 2017 highlights and 2018 outlook Andre Boysen, Securekey In the past year, we have seen a significant shift in the online It is clear that what began as a tool for solving problems marketplace, with several technological advances associated with digital currency transactions has now emerging and changing the way business is become a critical element for a variety of sectors, conducted online. Consumer buying patterns making transactions easier and more secure for have shifted, while businesses have altered both businesses and consumers – problems their strategy to adhere to the changing norm. that possess a multi-party trust issue. In the last year, among a long list of new Looking forward to 2018, blockchain will technologies, one in particular – blockchain – become one of the most important tools in has transitioned from an unknown concept to a developing SecureKey’s digital identity ecosystem, household name. Blockchain has emerged as one in which consumers will be given complete control of the most important tools in developing strong, secure over the information they share, with whom and when. digital identity in an online world full of bad actors and dark Blockchain’s distributed ledger technology enables new alleys. data architectures with distributed storage schemes while In 2017, IBM released blockchain-based software increasing data integrity – ultimately reducing the risk of Hyperledger Fabric 1.0, UPS joined the blockchain in the hacks or mass breaches and providing consumers with peace Trucking Alliance to create standards and education for of mind that their personal information is protected, and the freight industry, and most recently American Express providing better information assurance to businesses. introduced blockchain-enabled cross-border payments using The future is now, and blockchain will not be disappearing fintech startup Ripple. any time soon. <

APIs must be discoverable and reusable Danny Healy, financial technology evangelist, MuleSoft The arrival of Open Banking at the beginning of next year interactive and highly personalised services that securely will be one of the biggest shifts in the finance industry since access a customer’s banking history. the advent of online banking. Banks will be obligated to For example, we will start to see retailers draw on open APIs grant third-party providers access to customers’ accounts to allow customers to check their bank balances prior to through open APIs. purchase, without needing to leave the retailer’s website. However, we have already started to see a number of banks Key to getting this innovation off the ground and creating take the initiative over the past 12 months and begin to new banking services that stand out from the crowd will drive innovation by opening themselves up through APIs, to be ensuring that the APIs they create are discoverable and enable idea sharing from beyond the four walls of the bank. reusable. Yet if the banks are to get their Open Banking journey off In the same way that Apple’s App Store taught consumers to a successful start in 2018, the APIs they create need to ‘there’s an app for that’ wherever they have a need, 2018 will go beyond compliance alone. ‘Box-ticking’ to satisfy the be the year that people working in and around banks learn regulators will not offer any competitive advantage as Open ‘there’s an API for that’ when they have a similar need to Banking becomes widespread. Financial services will soon create a new service. become commoditised and consumers will decide which Banks like Barclays are already doing exactly this, bank to use in the same way they choose one fizzy drink experimenting with the capabilities that can be unleashed over another, based on their personal brand preference. through its APIs during hackathons. < PERSONALISATION To avoid this, in 2018 banks will increasingly look at how they can offer innovative solutions beyond payments, such as personalised services tailored to the customer’s needs. Those that succeed in next year’s Open Banking environment will be those that partner with third-party service providers to launch applications and services incorporating open banking data. With standardised and open APIs, third-party service providers will be able to create

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EPI January 2018 367.indd 13 30/11/2017 12:42:22 industry insight | year-end review

2018 promises to be a ground-breaking year for the payments sector Andy Davies, products development and strategy director, Pay360 by Capita We may have seen the introduction of new £5 and £10 These technologies providing new heights of security may notes and a £1 coin in 2017, but cash is losing its crown to help prevent a knee-jerk reaction of consumers requesting the younger generation, with more than one in 10 people their personal data is deleted – data that provides valuable aged between 25 and 34 using notes and coins no more insight to organisations helping them create a frictionless than once a month last year, according to UK Finance. customer experience and informing the shape and launch of This trend is likely to grow into 2018 as alternative ways successful new products. to pay rise in popularity. Following on from the success of contactless phone payments pioneered by the AI TO ENJOY SIGNIFICANT GROWTH likes of Apple Pay, more blue-chip brands are, for example, incorporating contactless technology Finally, an area where we expect to see into wearables, such as fitness and smart significant growth in 2018 will be AI and watches, but the boundaries are constantly machine learning. being pushed. This is technology evolving at lightning speed, Children are now using biometric payments as and cutting-edge payment providers are part of their everyday school life, and Peugeot- continuously exploring new applications for its Citroen recently launched car keys embedded with use. Through AI and machine learning, for example, a contactless Barclaycard chip. There are few limits to organisations will not only be able to identify individuals making everyday items smart and we expect to see further who are falling behind on payments, but their systems will innovations next year. be able to intelligently tailor and time communications to them based on what they know has resulted in action in the SECURITY UNDER THE SPOTLIGHT past. And if you add chat bots like Alexa and Siri into the mix, Under the spotlight for 2018 will be security, an area you can find a way to make more transactions online, which intensified with the upcoming GDPR. In 2017, we saw will reduce the volume of calls into contact centres – calls some high-profile security breaches which forced the issue which are more costly to process. We expect to see dramatic of security further up the boardroom agenda, and 2018 leaps forward with fraud prevention, know your customer could see a significant rise in requests for personal data and anti-money laundering as these rules-based systems to be deleted. Organisations will be able to benefit from leverage deep learning capabilities. consumer technologies that include biometric features such 2018 promises to be a ground-breaking year for the as facial recognition, fingerprint and iris scanning to provide payments sector and, as the evolution of technology additional reassurance to customers purchasing their goods continues to rocket, it is tempting to try and wager what our and services. predictions might be for 2019. <

Digital transformation to intensify Steven Murray, solutions director, Compuware The digital transformation that banks have been going applications quickly and build out the ecosystem needed to through will intensify to a whole new level in 2018 when make open banking a success. PSD2 comes into force, ushering in the era of open banking. We can also expect to see banks looking to extend their This shift will require banks to be more integrated with the performance monitoring capabilities to encompass the wider digital and fintech economy, having the ability to share mainframe more than ever over the course of the next 12 customer data quickly and securely through APIs. In order months. This will be essential if they are to ensure they can to do so, they will need to fully leverage the core systems identify the root cause of problems that arise with complete of record that are responsible for processing payment confidence and are not left vulnerable to taking the blame transactions and customer account information, and ensure for failed third-party transactions. they can integrate seamlessly with the new third-party Finally, given that open banking will provide third parties services now calling on them. with access to sensitive payments and account information, As a result, we can expect to see a great deal of investment banks will look to build out their ability to maintain a record in modernising the mainframe environment in the coming of how and where customer data is being used, which APIs year. This does not mean re-platforming; rather, banks can are requesting it and for what purposes it is being called adopt modernised developer tools, cultures and techniques upon, so they can provide a full record of data use and that enable non-mainframe experts to flawlessly update core access if required. <

14 | January 2018 | Electronic Payments International

EPI January 2018 367.indd 14 30/11/2017 12:42:24 industry insight | year-end review

2017 – a year of green shoots Mark Hewlett, wholesale banking relationship director, Ebury On the face of it, looking for “highlights” in the payment Whilst this gives non-European banks a head start, other space in 2017 compared to what to look forward to in regulators are watching Europe with increasing interest, so 2018 is a tough ask, as nothing really took hold and went they may have to play catch-up in the future. mainstream for individuals or businesses to get excited about Despite the headway made the talking has not stopped, and and adopt. a number of central banks and regulators are looking at DLT Taking a step back, though, 2017 could be looked back upon and their own crypto or digital currencies. as the year of green shoots that will benefit end users in SWIFT continues to engage its members on how to improve. 2018 and beyond. After years of talking about improving Others such as Ripple continue to build their networks and how money moves, we actually saw some action. put pressure on the traditional rails. It was a year of soft launches, preparation and collaboration Local and regional regulators, payment infrastructures and as opposed to one of wholesale change, but we have seen competition authorities continue to consult and press for a glimpse of the future. SWIFT’s gpi and its tracker is live more open access to non-banks and fintechs to shake up with a handful of banks offering it to clients. We have seen a payments and banking – a good example coming from the number of blockchain/DLT/crypto collaborations and proofs Canadian Competition Bureau in November. of concept, and SEPA Instant went live in November. All of these have the potential to improve the speed and transparency of cross-border payments going forward, SWIFT GPI BECOMES MAINSTREAM providing there is wider adoption, and that is where 2017 For 2018, we expect to see SWIFT gpi become more was a tough year to ask banks to invest time in these new mainstream for corporate cross-border payments, and SEPA capabilities and roll them out at launch. Instant to get more traction. It will be interesting to see what decision the Monetary Authority of Singapore takes at the EUROPEAN BANKS conclusion of its Project Ubin, which includes looking into a digital Singapore dollar, and how other central banks react. The vast majority of European banks are concentrating resources on other regulatory initiatives such as PSD2, With regards to PSD2, without the SCA RTS coming into MiFID2, Open Banking, Ringfencing and GDPR before giving force until the second quarter of 2019, the benefits of PISP these new capabilities to their clients. Against this backdrop, access will be muted in 2018 but watched with interest as Asian and American banks have been better adopters and banks start providing access to TPPs and how this changes further down the track when it comes to improving cross- the landscape. border payments. There are some interesting moves in the mobile wallet Meanwhile, European banks have had to concentrate on space that could get interesting if they start linking up. making their data lakes available to third parties, including It is probably still too soon to see blockchain/DLT going allowing third parties to initiate payments from their mainstream in 2018, but we hope for a good harvest from customer’s accounts. the 2017 shoots in 2018 and beyond. <

Less fanfare, more blockchain Stephen Holmes, CTO Digital Banking Lab, Virtusa One of 2018’s key developments will be the expansion of such as oil and gas in currencies other than the dollar, as this blockchain into several new environments that will force removes the need to comply with US regulators. companies to react. Blockchain offers a clear path to achieving that goal. < Firstly, we will see blockchain quietly being deployed into production at many banks – there will be less fanfare as we are no longer at the start of the ‘hype’ cycle. Secondly, there will be consortiums formed in industry to tackle the issue of blockchain standards for specific areas of banking, such as trade finance or cross-border payments. Finally, I think we can expect to see nation-states – in particular Russia and China – creating their own cryptocurrencies based on blockchain. They have been looking for a while at the possibility of trading commodities

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EPI January 2018 367.indd 15 30/11/2017 12:42:28 Feature | cross-border payments

every time a company wants to set up in a new country, there is another new set of protocols harmonising to understand, making expansion very cost- and time-intensive. “This level of fragmentation, and lack of cross-border interoperability, can also cross-border prohibit the negotiation of volume-based deals between payment stakeholders and hinder the development of innovative new payment solutions.” transactions Moreover, there are several intermediaries involved in the cross-border payment Following a successful partnership, nexo standards chair process, so the execution time for processing is significantly longer than domestic Claude Brun tells Briony Richter how the business has payments. This increases costs, which is why enabled Carrefour to transform its payment infrastructure it is so critical to integrate platforms that complement each other. he rapid rate of globalisation is Market Pay has reaped the benefits for Brun adds: “As nexo standards is an open, forcing businesses to transact more the Carrefour brand since embracing nexo global association dedicated to removing the Tfrequently across country borders. standards. The study reveals that since it has barriers present in today’s fragmented global Cross-border instant payments create a been established, Market Pay has handled 800 card payment acceptance ecosystem, it does seamless payment experience for businesses, million transactions for Carrefour in Europe. not have ‘competitors’. with a platform that simplifies the payment Highlighting the benefits of this “nexo standards enables fast, interoperable infrastructure. Consumers are also making partnership, the study shows that nexo’s and borderless payments acceptance by more global payments. For the industry, Acquirer Protocol has allowed Market Pay to standardising the exchange of payment this means significantly higher volumes offer acquirer services to Carrefour Group’s acceptance data between merchants, acquirers, of payments being transacted. As a result, businesses. It also states that since adopting payment service providers and other payment consumer expectations for digitally enabled, nexo, operational efficiency has improved, stakeholders.” real-time cross-border payments are growing. saving time and money for Carrefour. The study highlights that Market Pay A recent study by Market Pay gives an So far the partnership has been successful, found the ideal partner in nexo standards insight into its collaboration with nexo and in the next three years Carrefour has to centralise payments within the Carrefour standards. nexo standards enables swift, plans to carry out nexo protocols across all its Group. Before the partnership, Carrefour interoperable and borderless payments stores in Europe. The expansion will enable experienced difficulty in negotiating the acceptance by levelling the exchange of Carrefour’s central unit in Paris to standardise nature of the pan-European acceptance payment acceptance data between merchants, the exchange of payment-acceptance data infrastructure. acquirers, payment service providers and other across Europe. Brun says: “nexo standards works with its payment stakeholders. The study emphasises that nexo protocols members and the wider payments industry nexo standards chair Claude Brun tells EPI: are already able to support several payment to establish a standardised and universally “Cross-border payments have the potential services, like Apple Pay, Carrefour Pay and beneficial way to apply ISO 20022, to transform the world of card payments, C-zam. The partnership sets Carrefour up to manifested in a portfolio of implementation particularly in Europe. reach its target of being PCI DSS-compliant specifications and messaging protocols. “Understandably there have been – and by the end of 2018. “The association actively responds to the will continue to be – a number of challenges needs of its members and their customers to to overcome in the quest for seamless and CHALLENGES ensure that the specifications and protocols harmonised cross-border payments. One remain agile, relevant and address the evolving of the main challenges is the need for a Cross-border trade is growing so expeditiously needs of the fast-paced payments industry.” standardised payments infrastructure. that the pressure is starting to heighten on Sustaining an open and accessible global “The members of nexo standards, are financial institutions to improve the efficiency payments network has put a strain on dedicated to creating a unified global of the process. cross-border infrastructure, incurring high payments acceptance ecosystem that harnesses Brun states: “The current global costs. That, coupled with strict regulation, the efficiency and interoperability potential of payments market is very fragmented. The is pushing the industry to re-evaluate the the ISO 20022 standard, and have spent the incompatibility of proprietary systems, structure of cross-border payments. last four years focusing on this very challenge.” together with the varying domestic protocols On the other hand, most high-value By using nexo standards, all participants and legal requirements of individual countries, payments are made via a cross-border payment in payment acceptance can interoperate have resulted in acceptance infrastructures that process due to the speed and ability to securely effectively, regardless of location. Harnessing differ between countries. transfer large amounts globally. cross-border payments with an instant “This inevitably makes it difficult to Joining forces with nexo standards enables payment platform enables the swift and secure expand into new territories or create payment the Carrefour Group to process traceable transfer of money across borders. infrastructures that operate across borders, as transactions securely, regardless of location. <

16 | January 2018 | Electronic Payments International

EPI January 2018 367.indd 16 30/11/2017 12:42:28 analysis | replacing legacy

legacy systems: replacing the irreplaceable An ever-frequent bugbear of large, historical financial institutions is legacy infrastructure. Built in decades long gone, the monolithic platforms struggle to keep up with the fast-paced demand of the financial sector today. However, replacing it is an uphill task – so how does one go about it? Patrick Brusnahan investigates

s payments evolve, banks and banking vendors, Temenos for example, are people understanding that it is not a good idea financial institutions need to move moving into the payments space. However, to build your own software.” A faster than ever. However, legacy these companies may not be Dovetail’s biggest Cyprus-based Hellenic Bank chose Dovetail systems are a hindrance. competitor. in October of this year to help further its According to Efma’s Innovation in Retail “There is still a lot of desire for banks to digital transformation plan. This followed Banking report, the two biggest priorities for build their own systems at the higher end,” a similar decision by Bank of Cyprus in banks are system integration challenges and LaFleche explains. “We see in-house as our February. the legacy technology landscape. This is at the strongest competitor. That’s something we Why did they both pick Dovetail? “We fit forefront on the sector’s mind. always see.” very nicely into the shape of the project that “The biggest barrier to digital they have,” LaFleche says. transformation in 2016 was the legacy “They wanted a full payments reinvention technology environment,” the report states. and we had everything they needed right out UK-based vendor Dovetail, recently of the box.” acquired by Fiserv for an undisclosed amount, Legacy challenges differ from bank to bank, is one of many firms trying to solve the you start with high- but why? LaFleche explains: “It varies on what problem. Speaking to EPI, Trevor LaFleche, kind of services and how far they’re going Dovetail’s vice-president, product marketing value payments and in the front end. They’re all beginning to and analyst relations, sums it up. realise that, unless you have the capability of He says: “I think legacy platforms are renovate the house processing payments in the back end, there’s running out of steam. We find a significant not a lot you can do in the front end. It’s all replacement market in places where the room by room based on the fact that they need a modern technology isn’t able to deliver on the needs of platform.” the organisation.” The hesitation from many institutions is Dovetail prides itself on delivering an “out- inspired by the heavy task ahead. Replacing an of-the-box” capability to process payments. entire system takes time and money. LaFleche This results in a speedier process than a tool He adds: “Some of the arguments just fall concludes: “It is a challenge for banks to kit offering, which typically leads to a very on deaf ears in some institutions that have admit they need to modernise. It takes the long implementation cycle of around three to a very ingrained IT development shop. You alignments out of a lot of areas in a bank. It’s five years. can show them a reinvented payments system basically open-heart surgery for a bank. LaFleche states: “Our clients on the that takes a few years, but then they move “These projects are quite big in scope and Dovetail platform are going live in between six onto another project. They always forget that affect the facilities of the bank. What we and twelve months, because we start from the maintenance and payment systems evolve with found with organisation is that we can put basis of doing this straight away in a modern regulatory change. in a programme to locate pieces that need way. From that point, you can go live and “We still find that some people are less significant improvement. Maybe you start derive value much quicker.” aware of how much you have to invest. North with high-value payments, as there are fewer Obviously, Dovetail is not the only America and Asia definitely have more of an of them, and you renovate the house room by company trying to make its mark in this way. acceptance to a more packaged product. In room over a period of time. Fiserv acquired Dovetail, but FIS snatched Europe, and some other geographies, there “In months, generally not years, you end up Clear2Pay and Finastra added Fundtech is still a strong desire to build. I wouldn’t say up with a very robust and modern payment to its roster for $1.25bn. In addition, core we’re completely out of the woods in terms of capability.” <

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EPI January 2018 367.indd 17 30/11/2017 12:42:29 feature | hyperwallet

hyperwallet targets the gig economy payments sector Hyperwallet sees opportunities in low-value remittances for the fast-growing gig economy. Robin Arnfield speaks to Tomas Likar, vice-president of strategy and business development at the San Franciscan mass-payout specialist

ounded in Vancouver in 2000, private equity firm Primus Capital to fund its “We now have 10 million payees on Hyperwallet initially provided expansion initiatives. These included hiring our system,” Likar says. “The majority Fwhite-labelled C2C domestic and a number of experienced C-level executives, of our business is B2C rather than B2B. international remittances for Canadian opening an executive office in Austin, Texas But it doesn’t matter to us if the receiver credit unions. and setting up operations in London and is a consumer, a small business or a larger It then entered the mass-payout market, Sydney. business. There are some implications from enabling corporate clients to make large “Primus Capital is still our main investor,” the compliance perspective, but, from a volumes of low-value payments to sales agents, says Likar. “Because it is a private equity firm, transaction perspective, it’s much the same employees and customers around the world. Primus holds investments for a while.” whether paying a business or a consumer.” These payments include rewards, rebates, incentive payments for market research GROWTH GIG ECONOMY survey participants, payments to clinical trial participants, payments to marketplace sellers Hyperwallet has doubled the number of “Two or three years ago, we were very strong and contractors, and commissions to agents. its payees since December 2015 when the in the cross-border sales commission field,” In 2015, Hyperwallet decided to focus business said it had made payments to over says Likar. on the B2B/B2C payout market, closing five million independent workers on behalf of “This has been a key area for us, although its C2C remittance platform. At that stage, its corporate clients. we also have some e-commerce marketplaces Hyperwallet was particularly strong in using us to pay sellers. But now the gig the direct selling market, handling agent economy has become very important for us, commissions for firms such as Herbalife. and it has a very similar use case for making However, it was quick to capitalise on the payments to the other client segments we need by players in the gig economy – also serve. known as the sharing economy – to pay it doesn’t matter “Uber drivers and Airbnb property owners, freelance contractors both domestically for example, need to receive low-value and cross-border. An estimated 9.2 million to us if the receiver transfers either in real time or weekly or Americans will work in the gig economy by daily. We’re doing good volumes in the gig 2021, up from 3.8 million in 2016, according is a consumer, economy, but we see a lot of room for growth to combined research from Intuit and there for us.” Emergent Research. a small business or An international marketplace doing In June 2014, Hyperwallet received an cross-border payments in multiple countries undisclosed amount of investment from a larger business has to perform its own compliance and risk

18 | January 2018 | Electronic Payments International

EPI January 2018 367.indd 18 30/11/2017 12:42:37 feature | hyperwallet

management, which is complex, notes Likar. “So a lot of marketplaces decided they don’t want to touch payments, and we started to win a lot of business in the gig economy. The marketplaces just tell us whom to pay and how much.” HomeAway, the largest rival to Airbnb, is a client on whose behalf Hyperwallet pays its homeowners around the world. “Gig economy companies are realising they need to improve their workers’ payment experience,” says Likar. “The ride-sharing platforms are very similar, and if a driver has a bad experience with one company, they can easily install a rival’s app.” are issued to their recipients and bear the to receive funds paid to a bank account OPERATING MODEL client’s brand; associated with a debit card. • Portal is a multi-currency white-labelled Hyperwallet offers Visa Direct functionality Hyperwallet can offer its clients low-cost portal bearing the client’s brand. It is through the Hyperwallet JavaScript Widget. international remittances as it maintains local hosted by Hyperwallet and offers recipients “This Widget enables clients to quickly plug bank accounts in destination countries around a range of payout options, and into our platform and offer near real-time the world. “We hold working capital in accounts at banks around the world and have local capabilities in over 100 countries,” says Likar. a lot of marketplaces decided they don’t “We keep enough funds in each local account to clear the typical volume of transactions we want to touch payments, and we started handle each month in that country. “Once a month we do a top-up transfer via to win a lot of business in the gig economy SWIFT to each account to ensure we have enough money there. We use local clearing systems such as Faster Payments in the UK • Hyperwallet Direct is a set of publicly payout capabilities within their native and SEPA in Europe, and send our local banks available APIs that enable companies application, minimal coding required,” it said files multiple times a day telling them whom to integrate Hyperwallet’s payment in a news release. to pay and how much. functionality directly into their website “Our Visa Direct partnership is picking up,” “Our strength compared to other B2B or mobile platform or application. This says Likar. “But there needs to be more work payment providers is that our payments means a Hyperwallet client can collect done by us and Visa to promote the brand, as network was built for low-value payments,” their payee information directly from their people still don’t get the concept that they can Likar continues. “Most of our clients do existing platform and application and enter their debit card number to receive their thousands or tens of thousands of payments a send payments globally via Hyperwallet’s funds into their bank account.” month, but most of these payments are under network. “This leads to a better end user A priority for Hyperwallet is adding new $1,000. experience, but it is more complex than local funding methods, such as mobile wallets, “We’re especially competitive for payments integrating with our portal,” says Likar. in different Asian countries. “Because WeChat up to $5,000. Large-value transfers, for is such a popular payment method in China, example $500,000, can go over our network, PARTNERS we’re looking at adding WeChat,” Likar says. but the sender might do better with a bank “Every Asian country has its own mobile or specialist B2B provider which knows that Hyperwallet has around 50 bank and non- wallet, so we need to prioritise which ones we space better.” bank partners with which it works to pay add.” While even the smallest payments require funds to recipients, including MoneyGram, In Latin America – like Asia, another major Hyperwallet to verify the receivers’ identity, a Western Union Business Solutions, SoftBank market for Hyperwallet – the company is in lot more verification is required for large-value Payment Service, Earthport and PayPal. the process of adding local currency clearing transfers. “These companies help us to get funds to across the region, Likar says. “Also, we can’t send large sums like destination countries,” says Likar. “This means “In Europe, we expect to get business from $500,000 over the local ACH networks we use that recipients have multiple options as to marketplaces following PSD2’s introduction for low-value payments,” says Likar. how they get their money – direct into their in January 2018,” he says. Hyperwallet offers its clients three payout bank account, cash pickup at an agent’s office, “Marketplaces will need to comply with methods: deposit to a prepaid card, for example.” PSD2’s requirement that they use a processor • Card transfers to Visa- and Mastercard- In 2016, Hyperwallet added Visa Direct acquirer for their payments, which will branded plastic or virtual prepaid cards as a payout method, enabling recipients generate business for us.” <

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EPI January 2018 367.indd 19 30/11/2017 12:42:42 strategy | desjardins

canada’s desjardins standardises payments on open acceptance platform

Canada’s Desjardins Group has implemented an open standards payments architecture from nexo to facilitate its clients’ international payment card acceptance. It is now looking to offer the architecture to other financial institutions via its Monetico acquiring joint venture with France’s Crédit Mutuel. Robin Arnfieldreports

ouvement des caisses Desjardins Across Europe there is a lack of acquirer payment acceptance messaging is an association of savings and harmonisation between different domestic protocol across 14 European countries. Mcredit co-operatives (caisses) payment-acceptance standards and messaging located mostly in Quebec. protocols. MULTINATIONALS It is the largest Canadian co-operative A recent nexo presentation points out that financial group, and the sixth-largest globally, a multinational oil company operating in “We’re using nexo to deliver payment- with assets of C$258.4bn ($200bn) in 2016 12 European countries, for example, would acceptance services to our merchant customers and over seven million clients and members. require 10 different interfaces between its who operate in multiple countries including terminals and acquirers, and 20 different Canada and Europe,” says Normand Provost, NEXO STANDARDS interfaces between its terminals and its host Desjardins’ head of international card systems. payment standards. “Most of our merchants As a payment service provider (PSP), nexo announced in September 2017 that are Canada-based.” Desjardins found it was spending too much BNP Paribas had begun offering nexo’s Working with nexo, Desjardins is time and money managing the integration harmonising its payment acceptance of new payment solutions with high- DEPOSITS infrastructure and simplifying its exchange of maintenance legacy infrastructures. card acceptance data to support its merchant So Desjardins joined Brussels-based nexo Largest Canadian financial institutions customers’ domestic and international ranked by deposits Q3 2017 ($bn) standards, which was formed in 2014 from requirements. three European payments standards bodies: Toronto Dominion 686 “nexo creates a level playing field for EPASOrg, OSCar, and CIR SEPA-Fast. Royal Bank of Canada 624 all stakeholders, and a better ecosystem The global association’s ISO 20022-based Scotiabank 496 for sharing payments data internationally, protocols are designed to remove the barriers BMO 379 which is needed by larger stakeholders,” says in the fragmented card payment acceptance Provost. “Desjardins wants to move to the CIBC 352 ecosystem. It facilitates interoperable ISO 20022 messaging standard, as it’s more cross-border payments by standardising the Desjardins 138 XML-oriented, which is why we joined nexo exchange of payment acceptance data between National Bank of Canada 122 – not just because we want to be international merchants, acquirers and PSPs. Source: Desjardins but also to make it easier for merchants to

20 | January 2018 | Electronic Payments International

EPI January 2018 367.indd 20 30/11/2017 12:42:44 strategy | desjardins

interconnect with POS terminal managers and over 60 countries. “Monetico’s goal is to “We want to commercialise the technology payment processors via ISO 20022.” become a world-class leader in payments by we developed for Monetico, although we ISO 20022-based messaging protocols creating a range of solutions geared to local don’t see that as our main objective,” explains enable companies to standardise how their entrepreneurs and large-scale, international Provost. payment acceptance information is exchanged businesses,” says Patrice Dagenais, Desjardins’ “We’re open to discussions with other banks globally. vice-president, payment and business and will work with international partners, but Desjardins’ payment application adheres partnership. we’re not quite ready to licence the Monetico to nexo FAST POS terminal specifications, “Monetico’s strategy is to provide easier technology to other players yet.” which are based on EMV chip-and-PIN access to global payment solutions to stimulate technology and comply with the European innovation, facilitating global partnerships CONTACTLESS-ONLY Payments Council’s SEPA Cards Framework. and enabling cross-border growth.” Monetico has developed a nexo-based contactless-only card reader, which can be used in unattended applications such as nexo creates a level playing field for all transit or parking, says Provost. “We’ve also developed chip-and-PIN mPOS card readers stakeholders, and a better ecosystem for based on nexo,” he says. In April 2017, Desjardins launched sharing payments data internationally Canada’s first pilot of contactless Visa and Mastercard credit card payments on public transit buses. The financial institution says the nexo FAST As Monetico has deployed nexo standards, The pilot – which was due to last at least specifications have enabled it to develop Monetico-powered merchants can establish six months and operated in conjunction with a universally interoperable application, operations in new territories, uninhibited by Société de Transport de Laval – involved mitigating the need to redevelop the payment acceptance complexity, Dagenais deploying Monetico contactless card readers application according to the specific needs notes. Other benefits of nexo include on STL buses in the Quebec city of Laval. of each domestic payment acceptance delivering a consistent user experience at infrastructure. the point of sale across multiple payment PARTNERSHIPS Desjardins says that, as a result, types, and reducing payments vendor costs implementation costs for new payment by tapping into a potentially global base of In October 2017, Desjardins became a solutions have been reduced by as much vendors and suppliers. founding member of Montreal-based as 20%, and that it can now deploy Dagenais says Monetico can be Institute for Data Valorization (Ivado), a enhancements to its payments applications “parameterised” for each individual country, group of industry professionals and academic six to eight weeks faster than previous enabling merchants to deliver a consistent, developing data science expertise. deployment timeframes. familiar user experience for cardholders, Desjardins said that it will pool its expertise regardless of location. with Ivado to promote financial products and MONETICO “A Monetico terminal will speak to services innovation. the cardholder in their native language – “For Desjardins, Ivado membership is part Desjardins’ acquiring arm, Monetico, has regardless of the language used in the country of a process of prioritising the challenges of registered its payment solutions brand in where the terminal operates,” he explains. digital technology, which began with the creation of Desjardins’ innovation laboratory in December 2015,” it said. desjardins – key data “Cybersecurity, big data processing, performance optimisation and the design of Market shares by sector Surplus earnings to date analysis algorithms are all examples of possible Quebec FY2016 m that ultimately support access to digital banking services meeting the needs of today’s and tomorrow’s users.” Separately, Desjardins and pension fund La caisse de dépôt et placement du Québec (the

Quebec Deposit and Investment Fund) have created an investment fund of up to C$75m. The two founders say the independent venture fund will support the growth of fintech and AI applied to finance in Quebec and Canada. Caisse and Desjardins will invest equal

etai etai credit amounts for a joint total of C$50m, with saings onsumer ending m mortgages ommercia other investors also able to participate in the Source: Desjardins fund, they say. <

www.electronicpaymentsinternational.com | 21

EPI January 2018 367.indd 21 30/11/2017 12:42:46 industry insight | McLean Roche Consulting

fintech: after A decade, boom or bust?

2018 will mark 10 years since ‘fintech’ – the buzz term for financial technology startups – entered the lexicon, threatening to totally upend the banking sector as we know it, writes McLean Roche Consulting’s Grant Halverson. It has not done so yet, but will it?

otal fintech investment in the • Insurances and tech: Total invested that are currently 50-60% higher than other 10-year period 2008-2017 totals $2.24bn or 5.4%. investment categories and will require faster T $53.9bn, including venture capital deliver and increased performance. (VC), private equity and crowdfunding. It is significant that these nine segments The modest level of investment to date, The key question is whether this level of total 67% of VC fintech investment. It is at $53.9bn, is not enough to create the next investment is sufficient for a major disruption likely therefore that any major disruptor will financial service giant – Facebook, founded in of banking. Uber, for example, has raised emerge from these segments. 2004, had 11 founding rounds with $2.3bn $11.5bn in funding and debt in 18 funding Unicorns are startup companies with invested prior to its 2012 IPO. The largest rounds since March 2009, and has success in a valuations of $1bn or more. The CB Insights fintech sector, P2P lending, has only S6.2bn much smaller segment than financial services. index has 217 startups rated as unicorns, with in total investment over nine years, with a Uber has raised the equivalent of 21% of total valuations of $752bn. Uber is the top-rated market cap today of $3.6bn. fintech funding. unicorn at $68bn. The P2P example is salient. Launched when Total fintech investments by VCs during Fintech unicorn companies are considered money was cheap, the sector has realised that 2008-2017 are $41.3bn, which is only 7.4% the most successful, and the nearest to an exit. it is not quite that easy to build a billion- of all VC investments – not a dominant There are 24 fintech unicorns with valuations dollar business. The incumbent banks are category and well behind e-commerce. of $75.95bn – 10% of the total. Of those, 20 protected by considerable regulation, have vast A review the major startup phases – are in the US and China, with each one in resources and will not fall over easily: This is including angel investing, VC startup India, the Netherlands, Sweden and the UK. not the taxi industry. investing, the ‘unicorn’ phase and exits These incidents feed the narrative that through IPO or M&A – indicates likely IPOS OR M&AS startup lenders do very little that is new or results. The major fintech angel investing and innovative other than offering speed while VC startup investment categories are: Fintech IPOs formed the smallest part of falling back on existing industry tactics once • Peer-to-peer lending: Total invested the fintech M&A sector. The McLean Roche they have some scale. Most of the ideas are $6.24bn or 15%; Consulting review of M&As in 2014-2017 laser-focused on a small segment, and will not • SME and business lending: Total invested shows that 87% of transactions are M&A build size quickly. $2.83bn or 7%; acquisitions by other, often larger, players, The enthusiastic startups’ key challenge is • Student loans: Total invested $1.93bn or with 8% unable to IPO or find a buyer – the realisation that the world is changing and 4.6%; leaving 5% which IPO. they have to modify their dreams of world • POS and online payments: Total invested The peak years for IPOs was 2010 with domination and accept an M&A outcome $2.89bn or 7%; 18, followed by 2014 with 17 and 2015 with and work for a bank. This, in many cases, will • Cyber or digital asset designed to work 12, while in the 2016-2017 year to date there not work as the cultures are vastly different as a currency or a value exchange: Total have only been six with a total of $1bn. This between the young freewheeling startups invested $2.85bn or 7%; raises the question: Was 2010-2015 the high- and banks with their size, structure, politics, • Digital banking – retail banking using water mark for fintech IPOs? regulation and conservative approach to risk social media, mobile and web-based Fintech’s first decade is high on hype and and technology. services, often supported by tools and spin, but very low on delivering its vision of Previous aggressive, trend-oriented rewards, for example budget tools: Total a total disruption. There is no equivalent of acquisitions by banks, including monoline invested $3.5bn or 8.5%; Facebook, Google, Skype or Apple. That is not mortgage and credit card companies in the • Local and international remittances: to say fintechs will not be successful and build nineties, and mobile wallet companies in early Total invested $1.67bn or 4%; current ideas into growth-oriented startups. 2000s, all ended with faded dreams for all • Wealth/investment and related tech: The sector, however, faces some serious parties. Fintech in its current state could well Total invested $3.4bn or 8%, and headwinds which will challenge the valuations repeat this experience. <

22 | January 2018 | Electronic Payments International

EPI January 2018 367.indd 22 30/11/2017 12:42:47 HEAR ∤ NETWORK ∤ DISCOVER ∤ CELEBRATE SHAPE THE FUTURE OF RETAIL BANKING Retail Banking: Nordics 2018 21st March 2018 ∤ Stockholm, Sweden

The brave new world of retail banking has arrived but are banks in the Nordics in a position to take advantage? From January 2018 PSD2 comes into force and with it the era of open banking begins. Traditional financial institutions and new entrants such as challenger banks, alternative lenders, crowd funding and P2P have to a greater or lesser extent been preparing for the new paradigm, but will they thrive or just survive? At this critical point, Retail Banking: Nordics 2018 will bring together more than 200 industry leaders from traditional and new banks, providers and other key industry stakeholders and influencers. This comprehensive and inclusive event will explore, through a series of keynotes, panel sessions and round tables the opportunities and challenges financial institutions face as they enter an era of truly digital banking.

Topics to be debated during the event will include:

∤ Open Banking: can banks win through collaboration based on open APIs and data sharing? ∤ PSD2: what happens next? ∤ Bank/Fintech collaboration: is it really possible? ∤ AI and machine learning: hype or reality? ∤ Digital identity and biometrics ∤ New and disruptive business models ∤ The evolution/revolution in customer expectations Join the debate at Retail Banking: Nordics 2018 to engage, discuss and meet the leading game changers in the industry and to formulate new strategies and business models to take you forward in this brave new world of retail banking.

For more details please contact: Vicki Greenwood on [email protected] or call +44 (0) 20 3096 2580

RBI_Nordic.indd 1 30/11/2017 14:42 Intelligent Environments, the international provider of digital fi nancial services solutions in association with Retail Banker International, Cards International, Electronic Payments International, Private Banker International, and Motor Finance publications

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